S&P rates Optima notes B

Standard & Poor's said it assigned a B corporate credit rating to Optima Specialty Steel Inc. and a B rating to its $175 million senior secured notes due 2016 sold under Rule 144A. The recovery rating is 3, indicating expectation of 50% to 70% recovery.

The outlook is stable.

Proceeds from the financing, combined with additional sponsor equity, will be used to fund the company's purchase of Niagara LaSalle Corp. for $221 million, as well as pay down the debt of its wholly owned subsidiary Michigan Seamless Tube LLC.

The rating reflects the company's vulnerable business risk profile and its aggressive financial risk profile, S&P analyst Marie Shmaruk said in a statement.

These assessments are based on the company's relatively small size, its participation in the highly cyclical steel industry, a high dependence on energy and auto segments for a large portion of its earnings, and its aggressive financial policy, the agency said.

The company maintains some geographic and end-market diversity and will have adequate liquidity to meet its obligations during the next several quarters, the agency noted.

Optima's adjusted debt to EBITDA is expected to be below 4x in 2012.

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